- 23 -
sec. 2704(b)(1). An “applicable restriction” is a provision that
limits the ability of the partnership or corporation to liquidate
if (1) the restriction lapses after the transfer, or (2) the
transferor or any member of the transferor’s family, collectively
or alone, can remove or reduce the restriction after the
transfer. See sec. 2704(b)(2); sec. 25.2704-2(b), Gift Tax Regs.
However, a restriction on liquidation is not an applicable
restriction if it is not more restrictive than limitations on
liquidation under Federal or State law. See sec. 2704(b)(3).
In Kerr, the Commissioner contended that the provisions in
the partnership agreement (50-year term or dissolution by
agreement of all partners and the lack of withdrawal rights for
limited partners) were applicable restrictions under section
2704(b) because TRLPA sections 8.01 and 6.03 were less
restrictive. We rejected those arguments in Kerr and noted that,
under Texas law, a limited partner may withdraw from a
partnership without requiring the dissolution and liquidation of
the partnership. See id. at 473. We concluded that the
partnership agreements in Kerr were not more restrictive than the
limitations that generally would apply to the partnerships under
Texas law. See id. at 472-474. Similarly, we conclude that
section 2704(b) does not apply here.
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011